Driving efficiency and trust: DNV’s Emissions Connect in the new EU ETS landscape

Growing moves to decarbonize the maritime industry are being accompanied and advanced by its rapid digitalization. Following the expansion of the EU ETS into shipping in January 2024, the importance of accurate, reliable data has never been higher. DNV’s Emissions Connect offers a comprehensive solution that ensures accuracy and dependability in emissions verification, helping stakeholders manage costs effectively under the new regulatory framework.

The role of data in a changing maritime environment

“We’re in a whole new dimension now,” says Pål Lande, Digital Business Development Director at DNV. “A lot of work has been done in recent years, and new regulations have emerged, gradually raising the importance of emissions data. This started with the EU’s Monitoring, Reporting and Verification (MRV) regulation, which mandates emissions reporting on an annual basis.

“While MRV reporting will continue to be a requirement in itself, since January 2024 companies also have to manage the costs of carbon credits through the expansion of the EU’s Emissions Trading Scheme into shipping.”

Frontline’s digital journey

Although the implication of the EU ETS has changed the dynamics of emissions reporting, this has been on the horizon for some time. For some companies, this has been just another stage on their digitalization journey.

“We decided to embark on a journey about four years ago, together with DNV, to handle our digital transformation,” says Lars Pedersen, CTO at Frontline. “This started with data collection for ESG reporting and has since evolved into reporting for the EU’s MRV regulation and IMO’s Data Collection System.

“These were frontrunners to the EU ETS reporting and enabled a very smooth transition when this came into force in January 2024. This also means that we are well prepared for further regulations down the line, such as FuelEU Maritime.”

From annual to daily reporting

The implementation of the EU ETS in 2024 means that many shipowners now also need to report emissions data, and have it verified, as part of their day-to-day operations.

“Traditionally, decision-making in shipping has been informed by annual aggregated data, where deadlines were not urgent and the impacts from incorrectly inputted data were limited,” says Lande. “However, the introduction of the EU ETS has created a paradigm shift. While the ETS itself does not mandate daily reporting, the financial implications of emissions costs necessitate daily management of emissions data.

“Effective management of this data is now crucial, influencing everything from compliance and certification to financial accounting. It also profoundly affects how shipping companies interact with their commercial partners.”

Impact of EU ETS on commercial transactions

Under the EU ETS scheme, the shipowner is responsible for the reporting of data and the purchasing and surrendering of carbon credits, a change from previous regulations where the ship manager was responsible. Nonetheless, the complexity of commercial relationships means that clarity over emissions – and who will pay for them – is now a fundamental part of many transactions.

“Carbon costs and other liabilities need to be handled throughout the value chain. How this is done will depend on a range of factors, such as segment, geography and agreements between key stakeholders like owners, managers and charterers,” says Lande.

“For all of this to function correctly, it is vital that there is a high degree of trust in data related to emissions, and other things like ship performance. Failure to do this correctly could lead to a lot of disputes.”

The value of verification

Frontline operates one of the largest tanker fleets in the industry, dealing with commercial transactions across the value chain on a daily basis.

Having accurate, trusted data, delivered in a timely and cost-efficient way, and verified by a recognized classification society like DNV, provides it with a level of trust and security.

Lars Pedersen CTO , Frontline Management

“Every voyage involves a commercial settlement between owners and charterers,” says Pedersen. “Before, this was limited to the hiring of the vessel, but now it also includes the settlement of emissions.”

For this to function correctly, it is crucial that the data is both accurate and reinforced by a stamp of approval from a trusted third party.

“Having accurate, trusted data, delivered in a timely and cost-efficient way, and verified by a recognized classification society like DNV, provides it with a level of trust and security. This generates confidence throughout our own operations and helps a lot in commercial settlements.”

How does DNV’s Emissions Connect work?

The increasingly important role of emissions data in the maritime industry – and the challenges faced by industry players in adapting to the new regulations – led to the launch of DNV’s Emissions Connect service in April 2023. This provides independent third-party, real-time verification of emissions data through a user-friendly online platform. In addition, the service functions as a decision support system for users and – critically – also provides data management support, helping users to integrate emissions data into their wider operations.

“Complexities around the new emissions regulations can be overwhelming for some operators,” says Lande. “Emissions Connect offers a comprehensive platform for emissions data verification, supporting regulatory compliance. This facilitates the management of new emissions data demands, integrating into existing company operations.”

The challenges of the new emissions reporting environment

With years of preparation, Frontline has already implemented several layers of its own data quality checks, which precede verification processes from Emissions Connect.

“We have established a robust reporting mechanism where the aim is to ensure that reported data is as correct as possible from the entry point. If data is outside normal operating parameters, it will be picked up at the source and sent back to the crew for re-entry,” says Pedersen.

“In addition, validation checks from DNV’s verification system are made available to the crew, who continuously work to ensure that the data is clean and correct.”

Long-standing partnership helps to enhance digital experience

A close partnership between Frontline and DNV has helped to enhance the quality of digitalization and overall emissions reporting.

“There have been a lot of discussions and testing, in close cooperation with DNV over the past few years,” says Pedersen. “Combining the data and regulatory expertise of DNV with our own operational experience has enabled us to produce something practical and reliable, which works well in the new market environment.”

Future data requirements in shipping

More regulations are on the way, further underlining the importance of data across the maritime industry. This will include FuelEU Maritime – set to be implemented in January 2025 – which will set well-to-wake greenhouse gas emission intensity requirements on energy used on board ships over 5,000 GT trading in the EU. Further down the line, IMO could introduce its own carbon pricing scheme within the next three to four years.

“Data is rapidly becoming an important commodity in the maritime industry, and this is going to step up even more over the coming years,” says Lande.

“Adopting best practices now and instilling a mindset across the industry which underscores the importance of accurate, reliable data, verified by an independent third party, will help shipping to harness data as a key strength. This will be crucial in its quest for decarbonization.”

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